Investors Get Scammed in SEC-Backed Sting

Jan 30th 2002

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Gotcha! The SEC has created a unique and harmless "sting" operation to remind investors that research on a company is paramount to investment success. In an Internet fraud that would have made scammers proud, the SEC turned the tables and left thousands of eager investors red-faced and hopefully somewhat less ignorant than they were last week.

The SEC "created" a fake company, created a Web site, and issued a press release through traditional media outlets that the made up company, McWhortle Enterprises, supposedly the maker of a Bio-Hazard Alert Detector, was about to issue an IPO on January 30 and was taking on new investors prior to the IPO.

The Web site, located at www.mcwhortle.com, contained what appeared to be legitimate company information, testimonials, press releases, and even sported a photo of the corporate headquarters in Washington DC with the "McWhortle" name across the building.

Investors were invited to bid on the shares by emailing the company "with the number of shares you wish to purchase, together with your major credit card number and social security number (for identification) so we can reserve your slot."

All of it was fake. And all of it was set up to serve a purpose.

Once a potential investor clicked through to the page marked "BUY," a web page appears with the headline "WATCH OUT: If you responded to an investment idea like this . . . You could get scammed!" The text continues to explain to the investor that the company is a fake and points out several tips for investing so that no one would fall for a fraud like this.

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AccountingWEB salutes the ingenuity of the Securities and Exchange Commission, the Federal Trade Commission, the North American Securities Administrators Association, and the National Association of Securities Dealers who all participated in this exercise to alert investors to potential on-line frauds.